Dov Charney is not only ensuring that conditions at his American Apparel clothing factory are good, he's also making a profit. Here's how he's surprising the industry.

Southwest Airlines Spirit
November 01, 2003
Chris Warren

It's hot: one of those strifling, windless southern California summer days that sends people fleeing to the beach for the cooling of the Pacific Ocean, or, at the very least, keeps them imprisoned in their homes, worshiping the air conditioners.

But in an industrial section of downtown Los Angeles, inside a massive, pinkish factory — once a Southern Pacific rail depot-mixture of air conditioning, giant fans, and open windows keeps the air circulating and cool inside the cavernous, yet bustling factory. Intermingled in the flowing air is the smell of Chinese food wafting out of the employee cafeteria, where boxes of it are being unpacked for a lunch that is subsidized by the company. These are hardly the conditions one might expect to find inside what houses the operations and more than 1,200 employees of T-shirt and garment manufacturer, American Apparel; a sweatshop this ain't.

Indeed, the garment industry, for good reason, has become synonymous with abusive labor practices. It's common to hear stories of
government agencies raiding factories — which are usually staffed by recent immigrants unaware of laws and their rights — and finding
workers making pennies and enduring abysmal conditions. In fact, the U.S. Department of Labor reports that more than half of Los Angeles'
sewing operations violate minimum wage and overtime laws, and that about three-quarters ignore health and safety laws. "We get reports
all the time of rats and cockroaches running around, and really dangerous, dirty conditions," says Kimi Lee, executive director of the
Garment Worker Center, a group that advocates for clothing industry workers. "A typical factory has poor lighting, poor ventilation,
crowded and cramped conditions."

American Apparel, which has been in operation in L.A. since 1997 and aggressively markets itself as providing sweatshop-free products,
takes a very different approach in its treatment of workers, and it's one that Kimi Lee hopes will become the standard in the industry.
Not only are the working conditions at the company's 365,000-square-foot complex exemplary, but employees also get benefits like healthcare,
English lessons, massages, and the use of free telephones. The company, which besides T-shirts, also makes undergarments, shorts, and a few
other items, has even hired buses to transport workers interested in attending immigrant rights rallies. Most important, of course, are the
wages the workers earn: on average, American Apparel employees make $12 to $18 an hour, and sometimes much more.

MAN WITH A PLAN

The brain behind American Apparel's innovative approach to the clothing industry is Dov Charney, the company's ebullient, outspoken
34-year-old co-founder and CEO. A native of Montreal, Charney had an early love affair with American T-shirts. "I just always liked
wearing T-shirts, and I liked American T-shirts better than the Canadian ones because there was such a heritage to American T-shirts,"
he says. In high school, at a private Conneticut boarding school also attended by John Kennedy, Charney would stock up on American T-shirts,
jump on a train north to Montreal, and sell the items on the street. Charney eventually opted to drop out of college to devote himself
completely to the T-shirt trade.

In a way, Charney's efforts at American Apparel are simply the natural extension of his childhood business. Most of the clothing industry,
in an effort to cut costs to the bone, subcontracts the work of assembling garments to the lowest bidder-both in and outside the U.S. — thereby
giving up a great deal of control over the quality of the product and how workers are treated. Charney, on the other hand, keeps control
over virtually every aspect of the business: all the design work, marketing, and sewing is one at his downtown L.A. factory. Charney even does
much of the photography for his catalogues at the factory, using co-workers as models. By spurning contractors, Charney is able to ensure
personally that his products meet his standard and his employees are treated with dignity.

HAPPY WORKERS EQUALS BIG REVENUES

It would be one thing if Charney and American Apparel were decent towards their workers but bleeding money. But Charney is convinced that
not exploiting his workers — part of a philosophy he calls next-step capitalism, or neo-capitalism — is actually the key to his company's
profitability. While the company is private, it reported $40 million in sales for 2002 and is approaching $75 million for 2003. "By treating
workers well, you can actually make more money. People ask, 'How do you manufacture T-shirts in the United States paying twelve bucks an hour,
when it's 30 cents [an hour] offshore?' I say it's cheaper to pay fifteen bucks an hour," he says. "What we're saying is it's inefficient to
treat workers poorly."

Why? Charney is quick with a list of all the benefits he reaps from having a happy workforce. "We're able to avoid collective bargaining because we treat our workers properly, and that's a big plus," he says. So, too, is the low turnover rate. "If I hire 100 people, after a year, I'm going to have 94 people with me," he says. "No turnover improves training and it improves quality."

It also improves morale. Take the case of Mario Sorto, a production and sewing manager at the company. Sorto came to American Apparel almost two years ago, after close to 20 years in the garment industry. The conditions, incentives, and openness he found at the company were unlike anything he'd seen before. "It's completely different," he says. "The company treats people equally and gives everyone an opportunity to make a better salary and a better life for themselves." Indeed, Sorto hopes to spend the rest of his career at American Apparel.

IT'S STILL HARD WORK

But just because morale and conditions are good at American Apparel doesn't mean that having a job there is cushy; far from it, really. The company has abandoned the traditional garment production method, where workers are assigned one task — such as attaching collars to shirts — and are paid by the number of pieces they complete, with a team approach where individuals are paid based on the number of garments the team produce together. The incentive for fast work is clear: the more garments the team produces, the more they get paid per hour. "We want our folks to be as successful as they can possibly be," says Marty Bailey, American Apparel's vice president of operations, who spent 15 years working for Fruits of the Loom prior to joining the company. "The more successful our sewing operators are, the more successful this company is. The more they earn, the more we have an opportunity as a company to earn."

On the factory floor where sewers do their work, it's clear that it's a production process employees have embraced. Workers, most of whom speak Spanish, have left their smiles and jokes in the cafeteria. The whir of the machines provides the background noise of the feverish, very intense work going on. Eyes focused straight on their machines, workers' hands move rapidly, taking garment after and attaching sleeves or collars and then handing it on to the next person; it's skilled, precise, demanding work. Over each team hangs a board telling them, for each hour worked, how much money they've made; on this day, it ranges between $9 and $16 an hour.

Bailey believes the boards are strong motivators for employees. "The scoreboard is designed to let people know what they're capable of every hour, and also let them know how they did versus their potential," he says.

"It's real time, every-hour motivation. Maybe they're not successful one hour because of a problem. The next hour is a new opportunity to succeed, and the next hour is another opportunity to succeed again."

BIG PLANS

With his company's business model validated by its ever-expanding workforce and market share, Charney has his eyes on further growth. His shirts already sell well overseas, and he's looking to set up operations in Asia, perhaps with a factory in China. Charney vows that his approach to the treatment of workers won't change one iota when he's aboard. "We're going to do regional production, but it's not to run to a third-world country and screw the workers," he says. "It's to sell the product worldwide, and the regional production will be there to support regional sales. No matter where we go, it's going to be a new USA imperialism. Nobody will ever make anything less than the U.S. dollar minimum wage working for American Apparel."

Indeed, to hear Charney, whose infectious enthusiasm pervades his entire company, describe American Apparel's prospects, it's clear that he fully expects to eventually be the biggest force in the garment business. "We're able to do things that other companies can't do, which is why we think we're going to dominate the clothing industry," he says. "We can be two or three times larger than Levi's in its heyday."